Alberta celebrates ‘Balanced Budget Tax Freedom Day’ later than any other province
Canadian governments have amassed a significant amount of debt since the pandemic began. Although emergency spending was necessary, Canadians may wonder about the economic and tax implications of additional debt since Ottawa—and every province—forecast budget deficits this year.
Earlier this year, we calculated that Tax Freedom Day fell on May 24 in 2021. This is the day in the year when the average family has earned enough money to pay taxes imposed by all three levels of government—federal, provincial and local. Put differently, if Canadians were required to pay all their taxes up front, they would have to pay each and every dollar they earned to government prior to Tax Freedom Day.
However, these calculations do not account for the tax implications of the budget deficits various governments will run this year. In fact, according to budget forecasts, the Trudeau government will run a $154.7 billion deficit in 2021 while cumulative deficits for the provinces could reach $79.3 billion.
Taxes will ultimately pay for today’s deficits, which means the combined projected federal and provincial government deficits of $234.0 billion in 2021 should be considered as deferred taxes. To illustrate this point, we’ve calculated a “Balanced Budget Tax Freedom Day” to show when Tax Freedom Day would arrive if Canadian governments had to raise taxes today to balance their budgets instead of financing spending through borrowing. That day is July 7—44 days after the original May 24th estimate.
This “Balanced Budget Tax Freedom Day” also varies by province. Some provincial governments are in better fiscal shape than others, and the scale of provincial deficits in 2021 differ significantly. The Alberta government, for instance, will run a projected $18.2 billion deficit this year, the largest among all provinces (both as a percentage of the provincial economy and on a per-person basis).
Consequently, Alberta has the latest “Balanced Budget Tax Freedom Day” of any province. Indeed, the average Albertan family would not earn enough money to pay their total tax bill in 2021 until July 22. In other words, if the Trudeau and Kenney governments had to raise taxes today to balance their budgets instead of financing spending with borrowing, “Balanced Budget Tax Freedom Day” in Alberta would arrive two months later than the standard Tax Freedom Day.
But Alberta’s not alone. “Balanced Budget Tax Freedom Day” is more than a month later for several other provinces including Saskatchewan (47 days), Ontario (46 days) and British Columbia (43 days later). As such, the tax burden for average Canadian families is expected to rise in the future to pay for today’s spending during the pandemic. And Tax Freedom Day will likely occur later in subsequent years, as future generations of Canadians foot the bill for today’s spending through tax increases.
So on that note, Happy “Balanced Budget Tax Freedom Day,” although there’s not much to celebrate.